economic crisis

The time since 2008 has been a crucial historical moment for progressive economists to pull back the green curtain that surrounds the operation of the for-profit banking system, and expose that system for what it is: a government-protected, government-subsidized license to print money.

The problem is, as soon as you start saying things like that, people conclude you are some kind of wacked-out conspiracy theorist nut-bar. It sounds insane to claim that private banks have a license to create money out of thin air. As John Kenneth Galbraith put it, "The process by which banks create money is so simple that the mind is repelled."

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Thanks to Arthur Donner's Economic Comment for bringing this to my attention.

The official line we hear everyday is that the Canadian fundamentals are great, while other countries are in deep trouble because they are spending beyond their means and borrowing too much from the rest of the world.

Yet IMF projections show that Canada's Balance of Payments deficit on current account is now just about the worse among the advanced economies -- worse than the U.S., and set to be even worse than Italy and Spain in 2012.

Yesterday's GDP numbers (a sprightly gain of 0.3 per cent at basic prices in July) ensure that there will not be a so-called "technical recession" in Canada -- at least, not yet.

Economists have a perverted definition of "recession," whereby it's considered official only if real GDP declines 2 quarters in a row. That's hilariously arbitrary. And the flip side of the coin is even more galling: "recovery" is with us, they say, once real GDP stops contracting and starts growing again. That's why Mark Carney could declare the recession over in July 2009 (when real GDP started to grow again), even though for most Canadians it hasn't stopped feeling like a recession ever since.

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The meeting of G20 Labour Ministers in Paris on September 26-27, held in advance of the November G20 summit in Cannes, reached some conclusions which go some (extremely modest) way toward living up to prior G20 commitments in London and Pittsburgh to promote quality jobs and a more progressive labour market model as part of a long-term solution to the global economic crisis.

Ministers met with trade union and employer representatives, including myself, in a half-day session on their first day of meetings, and the ILO, with the OECD, was also invited to participate. There was one labour representative per country at the meeting with Ministers (and more from France.)

In an earlier post, I noted that falling real wages as indicated by July and August data from the Labour Force Survey which showed increases of just 1.4 per cent in nominal hourly wages over the past year signalled trouble ahead: "If this trend continues, it is likely to further undermine a weak recovery, negatively impacting upon consumer spending and perhaps serving as the tipping point to deflation of the housing bubble."

A spectre is haunting Europe -- and the United States. And soon, I submit, it will be here in Canada. That spectre: the proposition that the time has come to stop borrowing billions of dollars every year in order to give it to rich people.

President Barack Obama put this modest proposal into the heart of his fiscal and economic policy last week. He threatened to veto future budget bills that fail to ensure that the wealthiest taxpayers pay at least as high a rate of income tax as their own domestic servants. In this, Mr. Obama is echoing a policy reversal that is gathering steam.

The Harper government has been negotiating a comprehensive border deal with the United States. It is being presented to Canadians as an agreement that will yield greater access to the American market for Canadian exporters in return for the harmonization of Canadian security arrangements with those of the U.S. The idea is that we will benefit economically while satisfying the Americans that we are solid on the all-important issue, for them, of national security.

The Harper government makes case that the deal is necessary because Canadian exports have been and are being hampered by the thickening of the border since the terror attacks of September 11, 2001.

There's an interesting new research report from Statistics Canada, by Ping Ching Winnie Chan, Rene Morissette, and Marc Frenette, profiling the workers who were displaced in the recent recession, and comparing the outcomes to previous recessions in earlier decades (the downturns of the early 1980s and 1990s).Workers Laid Off During the Last Three Recessions is part of StatsCan's Analytical Studies series.

I haven't been through the report in detail and can't comment on the methodology, but here are some of the interesting (and often surprising) findings:

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The Labour Force Survey for August showed that average hourly wages were up by just 1.4 per cent from a year earlier, the same low level of increase as was registered in July. Consumer price inflation was 2.7 per cent in July, a bit down from 3.1 per cent in June and 3.7 per cent in May, but it seems that we have entered a period of falling real wages.

The picture is not much brighter if one looks at average weekly earnings, a function of hours worked and hourly wages. Average weekly wages in both July and August were up just 1.7 per cent from a year earlier.

If this trend continues, it is likely to further undermine a weak recovery, negatively impacting upon consumer spending and perhaps serving as the tipping point to deflation of the housing bubble.

My tiny claim to Sept. 11 fame is that I shared the horror of the crime with Margaret Atwood (I hope you know who I mean). We both happened to be at Toronto airport for an early flight to New York when we saw the first tower hit and, as longtime acquaintances, we hung together glued to the TV until the second crash made clear we weren't going anywhere that day. The day, as the cliché now insists, that changed everything. Maybe it's really true.